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GOP Obamacare Replacements Keep The Feds Front And Center


As Megan McArdle recently reported, both Scott Walker and Marco Rubio recently released their plans for repealing and replacing Obamacare with an “Obamacare alternative.” Bobby Jindal also has a detailed policy proposal for a “conservative consumer-focused health reform.”

All three of these plans have some good ideas—for instance, Jindal’s calls for ending state certificate-of-need programs, which let bureaucrats decide if a new hospital or other health facility should be built—but all three suffer from the curious defect of modern American health-care policy: a plan that turns on tax-based assistance for health insurance.

Walker and Rubio favor tax credits for the purchase of health insurance. Jindal calls for a tax deduction. The two are subtly yet importantly different. Jindal’s tax deduction is ostensibly more faithful to conservative principles. As Jindal tells The Federalist, a tax-credit plan “creates a new federal entitlement program” that “embraces universal coverage with government subsidies for potentially every American.” A tax deduction, on the other hand, “allow[s] taxpayers to keep more of their own money, and allows them to make the choice of what to do with that money. It’s not an increase in government spending.”

The Walker and Rubio plans are closer to what Michael F. Cannon describes as “Obamacare lite:” both are pushing for tax credits that “would allow Washington to decide how much coverage you purchase, penalize you if you don’t buy that government-defined plan, and conceal massive redistribution of income under the rubric of tax cuts.” The upshot is that such a plan would likely provide more coverage for more people than would Jindal’s—but Jindal’s would cost a good bit less, of course. (In response to the charge that his plan would cover fewer people, Jindal points out that conservatives “don’t measure success by government dependence,” which strikes me as a mildly evasive answer but also rather appropriate.)

Deregulate, Don’t Just Subsidize

Yet whatever the relative merits of either type of plan, all remain fundamentally flawed. They accept the strange notion that government should engage in a kind of carrot-and-stick tax-incentivizing scheme to make health insurance more accessible for the average American. No matter how radically the candidates pledge to reform the health-care industry, their plans to do so are disappointingly pedestrian from a wonkish point of view.

There is nothing consumer-oriented about a reliance on the byzantine, hopelessly complex tax code.

We’ve been here before, after all. Consumer-oriented health-care reform is a great idea, but there is nothing consumer-oriented about a reliance on the byzantine, hopelessly complex tax code and a dependence upon the absurdly inefficient American health-insurance system.

Tax credits and tax deductions, in other words, are not enough. A truly radical, consumer-based health-care reform would focus not on health insurance but on health care. The reform should be implemented at the point of provision, not the point of third-party purchase. Put another way: the problem with American health care isn’t that there aren’t enough tax credits for health insurance, it’s that we have an ossified, constricted, non-dynamic health-care market that is, for all intents and purposes, anti-consumerist. True health-care reform must reform health care, not insurance: we must liberate the health-care marketplace, not shore up the premium-payment system of the labyrinthine insurance industry.

How might this be done? By deregulating as much of the health-care industry possible in as short an amount of time as possible. Repealing certificate-of-need programs is a start. Loosening the Food and Drug Administration’s death grip on medical devices and pharmaceuticals is another. Relaxing state licensing requirements is a third. Medical malpractice reform is one more. Anything to loosen the bonds around the health-care industry and allow it the ability for dynamic innovation.

Revitalizing the Market Would Fix Problems Naturally

There is as much to do at the state level as at the federal. The Virginia code, for instance, demands that hospitals “shall be designed and constructed according to Part 1 and sections 2.1-1 through 2.2-8 of Part 2 of the 2010 Guidelines for Design and Construction of Health Care Facilities of the Facilities Guidelines Institute (formerly of the American Institute of Architects).” Might restricting the construction and expansion of hospitals to so narrow a framework contribute to the high cost of medical care? Couldn’t we scrap such inane regulations and still have a viable health-care system?

Our health-care industry should run like Uber. Instead, it’s run like a miserably inefficient public utility from the 1930s.

This kind of reform will bring down costs and make health care genuinely accessible. You won’t get those results from relying on twentieth-century ideas about tax codes and low deductibles.

“If you actually reduce the cost of health care,” Jindal says, “it does in fact result in lower premiums. If you only focus on premiums, and don’t actually reduce the cost of health care, then what you end up with is folks maybe having insurance, but [it’s] less valuable insurance.”

Our health-care industry should run like Uber. Instead, it’s run like a miserably inefficient public utility from the 1930s. Were the health-care market run as optimally as possible, there wouldn’t be any need for these complicated tax plans in the first place. Is there any Republican in the 2016 field willing to give the necessary deregulation a shot?

Perhaps not—although Jindal seems to get it, his plan still places an overwhelming emphasis on affordable health insurance over affordable health care. Maybe the primacy of health insurance is too far dug into the public and political consciousness to be dug out, for this election or any future election.

But while this year’s Republican plans may be an improvement over Obamacare, we should probably not pretend they will improve the health-care industry at large. That kind of improvement can only come about by a radical reduction in the government’s control over health care—and it is dispiriting that 2016’s Republican contenders are reluctant to pursue such a plan.